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Moore v Sweet (2018) 3 SCR 303
A person named as an irrevocable beneficiary of a life insurance policy doesn’t always have a right to keep the insurance money, the Supreme Court has confirmed. A third party may have a right to the insurance money if there has been “unjust enrichment.”
FACTS
Mr. Moore bought a $250,000 life insurance policy in 1985, while he was married to Ms. Moore. Ms. Moore was named the sole beneficiary, which means that she would get the money if Mr. Moore died. The Moores separated in 1999 and divorced in 2003. Until 2000, the Moores paid the $507.50 premium each year out of their joint bank account. In 2000, Ms. Moore and Mr. Moore verbally agreed that Ms. Moore would pay all of the yearly premiums. In exchange, Mr. Moore would keep Ms. Moore on the policy as the sole beneficiary. From 2000 on, Ms. Moore paid the premiums herself.
In 2000, Mr. Moore moved in with Ms. Sweet. Soon after, he made her the “irrevocable” beneficiary of the policy, even though he had agreed to keep Ms. Moore named as sole beneficiary. He didn’t tell Ms. Moore that he made this change.
Ontario’s Insurance Act sets out the rules for insurance policies. It says an insured person can name another person (or group of people) as the beneficiary of their life insurance policy. That other person can be named either a “revocable” beneficiary or an “irrevocable” beneficiary. “Revocable” beneficiaries can be removed from a policy at any time. They don’t have to agree, or even be informed that they are being removed. Ms. Moore was a “revocable” beneficiary. “Irrevocable” beneficiaries, like Ms. Sweet, can only be removed if they agree to it.
Ms. Moore only found out that she had been removed as the beneficiary when Mr. Moore died in 2013. At this point, she sued Ms. Sweet for $250,000, the value of the policy. She argued that Ms. Sweet got a benefit at her expense, and there was no legal basis for it. This kind of situation is called “unjust enrichment.” Ms. Moore asked the court to put the money in a “constructive trust,” a common request when unjust enrichment happens. A constructive trust means someone has to hold certain property for someone else’s benefit.
Both Ms. Moore and Ms. Sweet agreed that the verbal agreement between the Moores was a contract. The question was whether the Insurance Act gave Ms. Sweet legal basis to keep the money in spite of that.
The trial judge ruled in favour of Ms. Moore, saying Mr. Moore had given her rights to the policy through their verbal agreement. The Court of Appeal disagreed. It said that while Ms. Moore should get back all the money she paid for the premiums (about $7,000), Ms. Sweet should get to keep the rest of the money.
The majority at the Supreme Court ruled in favour of Ms. Moore. The fact that Ms. Sweet was an irrevocable beneficiary of the policy wasn’t enough for her to be allowed to keep the money. The Insurance Act set out how beneficiaries could be named, but it didn’t say that naming a new beneficiary would automatically override other people’s rights from previous agreements. Courts already said that other people could have rights to an insurance policy no matter who was actually listed on it. This could be through a contract or by the concept of “equity” (rules of fairness). Those people could claim the insurance money on some legal or “equitable” (fair) basis, like unjust enrichment. The majority also noted that Ms. Sweet would have received nothing if Ms. Moore ever stopped paying. For those reasons, the majority said that Ms. Moore should get the insurance money under a constructive trust.
This case was about what happens when someone has a pre-existing right to an insurance policy, but someone else is named as the irrevocable beneficiary. The majority said that in this case, the beneficiary was unjustly enriched and could not keep the insurance money.
The Courts Reasoning Based on Unjust Enrichment
Unjust Enrichment
[35] Broadly speaking, the doctrine of unjust enrichment applies when a defendant receives a benefit from a plaintiff in circumstances where it would be “against all conscience” for him or her to retain that benefit. Where this is found to be the case, the defendant will be obliged to restore that benefit to the plaintiff. As recognized by McLachlin J. in Peel (Regional Municipality) v. Canada, [1992] 3 S.C.R. 762, at p. 788, “At the heart of the doctrine of unjust enrichment . . . lies the notion of restoration of a benefit which justice does not permit one to retain.”
[36] Historically, restitution was available to plaintiffs whose cases fit into certain recognized “categories of recovery” — including where a plaintiff conferred a benefit on a defendant by mistake, under compulsion, out of necessity, as a result of a failed or ineffective transaction, or at the defendant’s request (Peel, at p. 789; Kerr, at para. 31). Although these discrete categories exist independently of one another, they are each premised on the existence of some injustice in permitting the defendant to retain the benefit that he or she received at the plaintiff’s expense.
[37] In the latter half of the 20th century, courts began to recognize the common principles underlying these discrete categories and, on this basis, developed “a framework that can explain all obligations arising from unjust enrichment” (L. Smith, “Demystifying Juristic Reasons” (2007), 45 Can. Bus. L.J. 281, at p. 281; see also Rathwell v. Rathwell, [1978] 2 S.C.R. 436, and Murdoch v. Murdoch, [1975] 1 S.C.R. 423, per Laskin J., dissenting). Under this principled framework, a plaintiff will succeed on the cause of action in unjust enrichment if he or she can show: (a) that the defendant was enriched; (b) that the plaintiff suffered a corresponding deprivation; and (c) that the defendant’s enrichment and the plaintiff’s corresponding deprivation occurred in the absence of a juristic reason (Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 848; Garland, at para. 30; Kerr, at paras. 30-45). While the principled unjust enrichment framework and the categories coexist (Kerr, at paras. 31-32), the parties in this case made submissions only under the principled unjust enrichment framework. These reasons proceed on this basis.
[38] This principled approach to unjust enrichment is a flexible one that allows courts to identify circumstances where justice and fairness require one party to restore a benefit to another. Recovery is therefore not restricted to cases that fit within the categories under which the retention of a conferred benefit was traditionally considered unjust (Kerr, at para. 32). As observed by McLachlin J. in Peel (at p. 788):
The tri‑partite principle of general application which this Court has recognized as the basis of the cause of action for unjust enrichment is thus seen to have grown out of the traditional categories of recovery. It is informed by them. It is capable, however, of going beyond them, allowing the law to develop in a flexible way as required to meet changing perceptions of justice.
[39] Justice and fairness are at the core of the dispute between Michelle and Risa, both of whom are innocent parties. Moreover, and to complicate matters, resolution of this dispute requires this Court to consider the elements of an unjust enrichment claim as they apply in a context that involves several parties. Pursuant to her Oral Agreement with Lawrence, Michelle paid around $7,000 in premiums to the Insurance Company between 2000 and 2013 in exchange for the right to remain named as beneficiary of the policy. When Lawrence passed away, however, the insurance proceeds (which totalled $250,000) were payable by the Insurance Company not to Michelle, but to Risa — the person whom Lawrence had subsequently named the irrevocable beneficiary, contrary to the contractual obligation he owed to Michelle. The result of this arrangement was that Risa’s enrichment was significantly greater than Michelle’s out-of-pocket loss. Moreover, Risa was entitled to receive the proceeds from the Insurance Company by virtue of her designation as irrevocable beneficiary, pursuant to ss. 190 and 191 of the Insurance Act.
[40] These unusual circumstances raise two distinct questions respecting the law of unjust enrichment. First, what is the proper measure of Michelle’s deprivation, and in what sense does it “correspond” to Risa’s gain? Second, does the legislative framework at issue provide a juristic reason for Risa’s enrichment and Michelle’s corresponding deprivation — and if not, can such a juristic reason be found on some other basis? I will deal with each of these questions in turn.
(1) Risa’s Enrichment and Michelle’s Corresponding Deprivation
[41] The first two elements of the cause of action in unjust enrichment require an enrichment of the defendant and a corresponding deprivation of the plaintiff. These two elements are closely related; a straightforward economic approach is taken to both of them, with moral and policy considerations instead coming into play at the juristic reason stage of the analysis (Kerr, at para. 37; Garland, at para. 31). To establish that the defendant was enriched and the plaintiff correspondingly deprived, it must be shown that something of value — a “tangible benefit” — passed from the latter to the former (Kerr, at para. 38; Garland, at para. 31; Peel, at p. 790; Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75, [2004] 3 S.C.R. 575, at para. 15). This Court has described the enrichment and detriment elements as being “the same thing from different perspectives” (Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2012 SCC 71, [2012] 3 S.C.R. 660 (“PIPSC”), at para. 151) and thus as being “essentially two sides of the same coin” (Peter, at p. 1012).
[42] The parties in the present case do not dispute the fact that Risa was enriched to the full extent of the $250,000 by virtue of her right to receive the insurance proceeds as the designated irrevocable beneficiary. The application judge found as much (at para. 27), and this finding is not contested on appeal.
[43] In addition to an enrichment of the defendant, a plaintiff asserting an unjust enrichment claim must also establish that he or she suffered a corresponding deprivation. According to Professor McInnes, this element serves the purpose of identifying the plaintiff as the person with standing to seek restitution against an unjustly enriched defendant (M. McInnes, The Canadian Law of Unjust Enrichment and Restitution (2014), at p. 149; see also Peel, at pp. 789-90, and Kleinwort Benson Ltd. v. Birmingham City Council, [1997] Q.B. 380 (C.A.), at pp. 393 and 400). Even if a defendant’s retention of a benefit can be said to be unjust, a plaintiff has no right to recover against that defendant if he or she suffered no loss at all, or suffered a loss wholly unrelated to the defendant’s gain. Instead, the plaintiff must demonstrate that the loss he or she incurred corresponds to the defendant’s gain, in the sense that there is some causal connection between the two (Pettkus, at p. 852). Put simply, the transaction that enriched the defendant must also have caused the plaintiff’s impoverishment, such that the defendant can be said to have been enriched at the plaintiff’s expense (P. D. Maddaugh and J. D. McCamus, The Law of Restitution (loose-leaf ed.), at p. 3-24). While the nature of the correspondence between such gain and loss may vary from case to case, this correspondence is what grounds the plaintiff’s entitlement to restitution as against an unjustly enriched defendant. Professor McInnes explains that “the Canadian conception of a ‘corresponding deprivation’ rightly emphasizes the crucial connection between the defendant’s gain and the plaintiff’s loss” (The Canadian Law of Unjust Enrichment and Restitution, at p. 149).
[44] The authorities on this point make clear that the measure of the plaintiff’s deprivation is not limited to the plaintiff’s out-of-pocket expenditures or to the benefit taken directly from him or her. Rather, the concept of “loss” also captures a benefit that was never in the plaintiff’s possession but that the court finds would have accrued for his or her benefit had it not been received by the defendant instead (Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805, at para. 30). This makes sense because in either case, the result is the same: the defendant becomes richer in circumstances where the plaintiff becomes poorer. As was succinctly articulated by La Forest J. in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, at pp. 669-70:
When one talks of restitution, one normally talks of giving back to someone something that has been taken from them (a restitutionary proprietary award), or its equivalent value (a personal restitutionary award). As the Court of Appeal noted in this case, [the respondent] never in fact owned the [disputed] property, and so it cannot be “given back” to them. However, there are concurrent findings below that but for its interception by [the appellant], [the respondent] would have acquired the property. In Air Canada . . . , at pp. 1202-03, I said that the function of the law of restitution “is to ensure that where a plaintiff has been deprived of wealth that is either in his possession or would have accrued for his benefit, it is restored to him. The measure of restitutionary recovery is the gain the [defendant] made at the [plaintiff’s] expense.” (Emphasis added.) In my view the fact that [the respondent in this case] never owned the property should not preclude it from the pursuing a restitutionary claim: see Birks, An Introduction to the Law of Restitution, at pp. 133-39. [The appellant] has therefore been enriched at the expense of [the respondent]. [Emphasis in original.]
While Lac Minerals turned largely on the defendant’s breach of confidence and breach of fiduciary duty, the above comments were made in the context of La Forest J.’s analysis of the tripartite unjust enrichment framework as it was applied in that case. My view is thus that these comments are applicable to the analysis in the present case.
[45] The foregoing also indicates that the corresponding deprivation element does not require that the disputed benefit be conferred directly by the plaintiff on the defendant (see McInnes, The Canadian Law of Unjust Enrichment and Restitution, at p. 155, but also see pp. 156-83; Maddaugh and McCamus, The Law of Restitution, at p. 35-1). This understanding of the correspondence between loss and gain has also been accepted under Quebec’s civilian approach to the law of unjust enrichment:
The theory of unjustified enrichment does not require that the enrichment pass directly from the property of the impoverished to that of the enriched party . . . . The impoverished party looks to the one who profited from its impoverishment. It is then for the enriched party to find a legal justification for its enrichment.
(Cie Immobilière Viger Ltée v. Lauréat Giguère Inc., [1977] 2 S.C.R. 67, at p. 79; see also Lacroix v. Valois, [1990] 2 S.C.R. 1259, at pp. 1278-79.)
[46] Taking a straightforward economic approach to the enrichment and corresponding deprivation elements of the unjust enrichment framework, I am of the view that Michelle stands deprived of the right to receive the entirety of the policy proceeds (for a value of $250,000) and that the necessary correspondence exists between this deprivation and Risa’s gain. With respect to the extent of Michelle’s deprivation, my view is that the quantification of her loss should not be limited to her out-of-pocket expenditures — that is, the $7,000 she paid in premiums between 2000 and 2013. Pursuant to her contractual obligation, she made those payments over the course of 13 years in exchange for the right to receive the policy proceeds from the Insurance Company upon Lawrence’s death. In breach of his contractual obligation, however, Lawrence instead transferred that right to Risa. Had Lawrence held up his end of the bargain with Michelle, rather than designating Risa irrevocably, the right to payment of the policy proceeds would have accrued to Michelle. At the end of the day, therefore, what Michelle lost is not only the amount she paid in premiums. She stands deprived of the very thing for which she paid — that is, the right to claim the $250,000 in proceeds.
[47] To be clear, therefore, Michelle’s entitlement under the Oral Agreement is what makes it such that she was deprived of the full value of the insurance payout. In other cases where the plaintiff has some general belief that the insured ought to have named him or her as the designated beneficiary, but otherwise has no legal or equitable right to be treated as the proper recipient of the insurance money, it will likely be impossible to find either that the right to receive that insurance money was ever held by the plaintiff or that it would have accrued to him or her. In such cases, the properly designated beneficiary is not enriched at the expense of a plaintiff who had no claim to the insurance money in the first place — the result being that the plaintiff will not have suffered a corresponding deprivation to the full extent of the insurance proceeds (Love v. Love, 2013 SKCA 31, 359 D.L.R. (4th) 504, at para. 42).
[48] My colleagues, Gascon and Rowe JJ., approach Michelle’s loss differently. They take the position that unjust enrichment cannot be invoked by a claimant to protect his or her “contractual expectations against innocent third parties” (para. 104). While they agree that the Canadian principle against unjust enrichment operates where a plaintiff has lost wealth that was either in his or her possession or that would have accrued for his or her benefit, they take the position that “awards for expected property have generally been where there was a breach of an equitable duty”, and they distinguish that situation from cases where the plaintiff held “a valid contractual expectation” of receiving certain property (para. 104).
[49] My view is that it is not useful, in the context of unjust enrichment, to distinguish between expectations based on a contractual obligation and expectations where there was a breach of an equitable duty (see my colleagues’ reasons, at para. 104). Rather, a robust approach to the corresponding deprivation element focuses simply on what the plaintiff actually lost — that is, property that was in his or her possession or that would have accrued for his or her benefit — and on whether that loss corresponds to the defendant’s enrichment, such that we can say that the latter was enriched at the expense of the former. As was observed by Professors Maddaugh and McCamus in The Law of Restitution, one source of difficulty in these kinds of disappointed beneficiary cases is
a rigid application of the “corresponding deprivation” or “expense” element as if it requires that the benefit in the defendant’s hands must have been transferred from, or constitute an out-of-pocket expense of, the plaintiff. . . . [R]estitution of benefits received from third parties may well provide a basis for recovery. In this particular context, the benefit received can, in any event, normally be described as having been received at the plaintiff’s expense in the sense that, but for the mistaken failure to implement the arrangements in question, the benefit would have been received by the plaintiff. [Emphasis added; p. 35-21.]
I agree. In this case, given the fact that Michelle held up her end of the bargain, kept the policy alive by paying the premiums, did not predecease Lawrence, and still did not get what she actually contracted for, it seems artificial to suggest that her loss was anything less than the right to receive the entirety of the insurance proceeds.
[50] From this perspective, it is equally clear that Risa’s enrichment came at Michelle’s expense. It is not only that Michelle’s payment of the premiums made Risa’s enrichment possible — something which the application judge found to be the case: “The change of designation, and [Risa’s] later receipt of the proceeds of the Policy, would not have been possible but for [Michelle’s] performance of her obligations under the agreement” (para. 48). What is more significant is that Risa’s designation gave her the statutory right to receive the insurance proceeds, the necessary implication being that Michelle would have no such right despite the fact that she had a contractual entitlement, by virtue of the agreement with Lawrence, to remain named as beneficiary. Because Risa received the benefit that otherwise would have accrued to Michelle, the requisite correspondence exists: the former was enriched at the expense of the latter.
[51] My colleagues also dispute this proposition. They say that any deprivation suffered by Michelle is attributable to the fact that she lacks the practical ability to recover anything against Lawrence’s insolvent estate. The result, in their view, is that what Risa received — a statutory entitlement to the proceeds — is different than what Michelle lost — which they characterize as the ability to enforce her contractual rights against Lawrence’s estate (para. 111). Again, I disagree; since Risa was given the very thing that Michelle had contracted to receive and was otherwise entitled to receive (given that she held up her end of the bargain), it seems evident to me that Risa was enriched at Michelle’s expense. To be clear, it is not simply that Risa gained a benefit with a value equal to the amount of Michelle’s deprivation. Rather, what Risa gained is the precise benefit that Michelle lost: the right to receive the proceeds of Lawrence’s life insurance policy. I would also add that the insolvency of Lawrence’s estate simply means that Michelle would be unable to recover the value of her loss by bringing an action against Lawrence’s estate in breach of contract; it does not affect her ability to bring an unjust enrichment claim against Risa. The fact that a plaintiff has a contractual claim against one defendant does not preclude the plaintiff from advancing his or her case by asserting a separate cause of action against another defendant if it appears most advantageous (Central Trust Co. v. Rafuse, [1986] 2 S.C.R. 147, at p. 206).
[52] I would therefore conclude that the requisite enrichment and corresponding deprivation are both present in this case. The payability of the insurance proceeds by the Insurance Company for Risa’s benefit did in fact impoverish Michelle “to the full extent of the insurance payout in [Risa’s] favour” (Court of Appeal decision, at para. 208 (Lauwers J.A., dissenting)).
[53] In light of this, the Court of Appeal’s order — which was made on the consent of the parties, and which requires that $7,000 of the proceeds be paid to Michelle and that the balance be paid to Risa — cannot be upheld on a principled basis. If there is a juristic reason for Risa’s retention of the insurance money, then Michelle’s claim will necessarily fail and Risa will be entitled to the full $250,000. If there is no such juristic reason, however, then Michelle’s unjust enrichment claim will succeed and she will be entitled to a restitutionary remedy totalling that amount.
(2) Absence of Any Juristic Reason
[54] Having established an enrichment and a corresponding deprivation, Michelle must still show that there is no justification in law or equity for the fact that Risa was enriched at her expense in order to succeed in her claim. As observed by Cromwell J. in Kerr (at para. 40):
The third element of an unjust enrichment claim is that the benefit and corresponding detriment must have occurred without a juristic reason. To put it simply, this means that there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff, making its retention “unjust” in the circumstances of the case . . . . [Emphasis added.]
[55] This understanding of juristic reason is crucial for the purposes of the present appeal. The third element of the cause of action in unjust enrichment is essentially concerned with the justification for the defendant’s retention of the benefit conferred on him or her at the plaintiff’s expense — or, to put it differently, with whether there is a juristic reason for the transaction that resulted in both the defendant’s enrichment and the plaintiff’s corresponding deprivation. If there is, then the defendant will be justified in keeping or retaining the benefit received at the plaintiff’s expense, and the plaintiff’s claim will fail accordingly. At its core, the doctrine of unjust enrichment is fundamentally concerned with reversing transfers of benefits that occur without any legal or equitable basis. As McLachlin J. stated in Peter (at p. 990), “It is at this stage that the court must consider whether the enrichment and detriment, morally neutral in themselves, are ‘unjust’.”
[56] In Garland, this Court shed light on exactly what must be shown under the juristic reason element of the unjust enrichment analysis — and in particular, on whether this third element requires that cases be decided by “finding a ‘juristic reason’ for a defendant’s enrichment” or instead by “asking whether the plaintiff has a positive reason for demanding restitution” (para. 41, citing Garland v. Consumers’ Gas Co. (2001), 57 O.R. (3d) 127 (C.A.), at para. 105). In an effort to eliminate the uncertainty between these competing approaches, Iacobucci J. formulated a juristic reason analysis that proceeds in two stages.
[57] The first stage requires the plaintiff to demonstrate that the defendant’s retention of the benefit at the plaintiff’s expense cannot be justified on the basis of any of the “established” categories of juristic reasons: a contract, a disposition of law, a donative intent, and other valid common law, equitable or statutory obligations (Garland, at para. 44; Kerr, at para. 41). If any of these categories applies, the analysis ends; the plaintiff’s claim must fail because the defendant will be justified in retaining the disputed benefit. For example, a plaintiff will be denied recovery in circumstances where he or she conferred a benefit on a defendant by way of gift, since there is nothing unjust about a defendant retaining a gift of money that was made to him or her by (and that resulted in the corresponding deprivation of) the plaintiff. In this way, these established categories limit the subjectivity and discretion inherent in the unjust enrichment analysis and help to delineate the boundaries of this cause of action (Garland, at para. 43).
[58] If the plaintiff successfully demonstrates that none of the established categories of juristic reasons applies, then he or she has established a prima facie case and the analysis proceeds to the second stage. At this stage, the defendant has an opportunity to rebut the plaintiff’s prima facie case by showing that there is some residual reason to deny recovery (Garland, at para. 45). The de facto burden of proof falls on the defendant to show why the enrichment should be retained. In determining whether this may be the case, the court should have regard to two considerations: the parties’ reasonable expectations and public policy (Garland, at para. 46; Kerr, at para. 43).
[59] This two-stage approach to juristic reason was designed to strike a balance between the need for predictability and stability on the one hand, and the importance of applying the doctrine of unjust enrichment flexibly, and in a manner that reflects our evolving perception of justice, on the other.
(a) First Stage — None of the Established Categories Applies in These Circumstances
[60] The first stage of the Garland framework asks whether a juristic reason from an established category operates to deny recovery. Michelle submits that none of these categories applies in the circumstances of this case. Risa takes the position that the Insurance Act required the proceeds of the policy to be paid exclusively to her as the validly designated beneficiary, such that the applicable legislation constitutes a juristic reason to deny the recovery sought by Michelle.
[61] The main issue at this stage of the analysis is therefore whether a beneficiary designation made pursuant to ss. 190(1) and 191(1) of the Insurance Act — which, when coupled with Lawrence’s insurance policy, makes it clear that Risa is the one to whom the insurance proceeds are payable — provides a juristic reason for Risa to retain those proceeds in light of Michelle’s claim to the money. Put differently, the question can be framed as follows: is there any aspect of this statutory framework that justifies the fact that Risa was enriched at Michelle’s expense? If so, Michelle’s claim will necessarily fail.
[62] My colleagues dispute this proposition. In their view, it is sufficient to show that there is some juristic reason for the fact that the defendant was enriched, and there is thus no need to demonstrate that the enrichment and the corresponding deprivation occurred without a juristic reason. With respect, this proposition is at odds with the clear guidance provided by this Court in Kerr (para. 40, reproduced at para. 54 of these reasons) and disregards the work already done by the recognized categories of juristic reasons identified in Garland. Each of these categories points to a relationship between the plaintiff and the defendant that justifies the fact that a benefit passed from the former to the latter. To focus exclusively on the reason why the defendant was enriched is to ignore this key aspect of the law of unjust enrichment.
[63] Two categories of juristic reasons might be said to apply in the circumstances of this case: disposition of law and statutory obligations. Disposition of law is a broad category that applies in various circumstances, including “where the enrichment of the defendant at the plaintiff’s expense is required by law, such as where a valid statute denies recovery” (Kerr, at para. 41 (emphasis added)). The statutory obligations category operates in a substantially similar manner, precluding recovery where a legislative enactment expressly or implicitly mandates a transfer of wealth from the plaintiff to the defendant. Although there is undoubtedly a degree of overlap between these two distinct categories, what matters for the purposes of this appeal is that a plaintiff’s claim will necessarily fail if a legislative enactment provides a reason for the enrichment and corresponding deprivation, so as to preclude recovery in unjust enrichment. As Professors Maddaugh and McCamus note in The Law of Restitution:
. . . it is perhaps self‑evident that an unjust enrichment will not be established in any case where enrichment of the defendant at the plaintiff’s expense is required by law. The payment of validly imposed taxes may be considered unjust by some but their payment gives rise to no restitutionary right of recovery. [Emphasis added; footnotes omitted; p. 3-28.]
[64] The jurisprudence provides ample support for this proposition. Among the issues in Reference re Goods and Services Tax, [1992] 2 S.C.R. 445 (“GST Reference”), was whether suppliers registered under the Excise Tax Act , R.S.C. 1985, c. E-15 , that incurred costs in collecting the Goods and Services Tax on behalf of the federal government could recover those costs from the government on the basis of restitution. For a majority of this Court, Lamer C.J. answered this question in the negative:
Under the GST Act the expenses involved in collecting and remitting the GST are borne by registered suppliers. This certainly constitutes a burden to these suppliers and a benefit to the federal government. However, this is precisely the burden contemplated by statute. Hence, a juridical reason for the retention of the benefit by the federal government exists unless the statute itself is ultra vires. [Emphasis added; p. 477.]
[65] A similar issue arose in Gladstone v. Canada (Attorney General), 2005 SCC 21, [2005] 1 S.C.R. 325. In that case, the respondents were charged under the Fisheries Act, R.S.C. 1970, c. F-14, for harvesting and attempting to sell large quantities of herring spawn. The Department of Fisheries and Oceans seized and sold the herring spawn, and the appellant Crown in Right of Canada held the proceeds pending the outcome of the proceedings. The proceedings were eventually stayed and the net proceeds paid to the respondents. Because the Crown refused to pay interest or any other additional amount, however, the respondents sought restitution in the amount of $132,000, on the ground that the Crown had been unjustly enriched by its retention of the proceeds during the time of seizure. Writing for a unanimous Court, Major J. denied that claim on the following basis:
Here, Parliament has enacted a statutory regime to regulate the commercial fishery. It has provided an extensive framework dealing with the seizure and return of things seized. This regime specifically provides for the return of any fish, thing, or proceeds realized. This was followed. Interest or some other additional amount might have been gratuitously included, but it was not. The validity of the Fisheries Act was not, nor could have been, successfully challenged. Therefore, the Act provides a juristic reason for any incidental enrichment which may have occurred in its operation. As a result, the unjust enrichment claim fails. [para. 22]
In short, it was Major J.’s position that the statutory regime, by specifying what had to be returned, made it clear that anything falling outside of the specified categories was to be retained by the Crown. In other words, the Fisheries Act stipulated that, in certain circumstances, a benefit would be retained by the Crown.
[66] These cases are examples of situations where a statute precluded recovery on the basis of unjust enrichment. It is to be noted that in each case, recovery was denied because the legislation in question expressly or implicitly required the transfer of wealth between the plaintiff and the defendant and therefore justified the defendant’s retention of the benefit received at the plaintiff’s expense. It is in this way that the applicable legislation can be understood as “denying” or “barring” recovery in restitution and therefore as supplying a juristic reason for the defendant’s retention of the benefit.
[67] What, then, should we make of ss. 190(1) and 191(1) of the Insurance Act? The former permits the insured to identify the person to whom or for whose benefit the insurance money is payable when the insured passes away. Coupled with the insurance contract, it directs the insurer to pay the proceeds to the person so designated. The latter provides that such a designation may be made irrevocably.
[68] Given the fact that a statute will preclude recovery for unjust enrichment where it requires (either explicitly or by necessary implication) that the defendant be enriched to the detriment of the plaintiff, the provisions of the Insurance Act may therefore provide a juristic reason for the beneficiary’s enrichment vis-à-vis any corresponding deprivation that may have been suffered by the insurer at the time the insurance money is eventually paid out. For this reason, an unjust enrichment claim brought by the insurer against the designated beneficiary (revocable or irrevocable) would necessarily fail at this stage; the rights and obligations that exist in that context — both statutory and contractual — justify the beneficiary’s enrichment at the insurer’s expense (Saskatchewan Crop Insurance Corp. v. Deck, 2008 SKCA 21, 307 Sask. R. 206, at paras. 47-54).
[69] A valid beneficiary designation under the Insurance Act has also been found to constitute a juristic reason that defeats a third party’s claim for the entirety of the death benefit in circumstances where that party paid some of the premiums under the erroneous belief that he or she was the named beneficiary. In Richardson (Estate Trustee of) v. Mew, 2009 ONCA 403, 96 O.R. (3d) 65, the deceased had maintained his first wife as the designated beneficiary under a life insurance policy. His second wife, who did not have a contractual right to be named as beneficiary, wrongly believed that he had executed a change of beneficiary designation in her favour, and paid some of the policy premiums — initially from a joint bank account she shared with the deceased and later from her own bank account. She sought the imposition of a constructive trust in her favour over the policy proceeds, arguing that there was no juristic reason for the first wife’s enrichment. Even accepting that the second wife could be said to have suffered a corresponding deprivation, the Ontario Court of Appeal upheld the motion judge’s finding that a valid beneficiary designation under the Insurance Act amounted to a juristic reason that defeated the second wife’s claim for the insurance money that was payable to the first wife. I would observe that the claimant in that case sought a constructive trust over the entire death benefit, and not merely the return of any payments made on the basis of her erroneous belief; the Court of Appeal did not decide whether she would be entitled to the return of those payments, and that question is not before us today.
[70] At issue in this case, however, is whether a designation made pursuant to ss. 190(1) and 191(1) of the Insurance Act provides any reason in law or justice for Risa to retain the disputed benefit notwithstanding Michelle’s prior contractual right to remain named as beneficiary and therefore to receive the policy proceeds. In other words, does the statute preclude recovery for a plaintiff, like Michelle, who stands deprived of the benefit of the insurance policy in circumstances such as these? In my view, it does not. Nothing in the Insurance Act can be read as ousting the common law or equitable rights that persons other than the designated beneficiary may have in policy proceeds. As this Court explained in Rawluk v. Rawluk, [1990] 1 S.C.R. 70, at p. 90, the “legislature is presumed not to depart from prevailing law ‘without expressing its intentions to do so with irresistible clearness’” (see also Gendron v. Supply and Services Union of the Public Service Alliance of Canada, Local 50057, [1990] 1 S.C.R. 1298). In KBA Canada Inc. v. 3S Printers Inc., 2014 BCCA 117, 59 B.C.L.R. (5th) 273, for example, the British Columbia Court of Appeal found that the Personal Property Security Act, R.S.B.C. 1996, c. 359, provided a “complete set of priority rules” that was “designed to replace convoluted common law, equitable and statutory rules that beset personal property security law with complexity and uncertainty” (paras. 27 and 21, citing Bank of Montreal v. Innovation Credit Union, 2010 SCC 47, [2010] 3 S.C.R. 3). In those circumstances, there was no “room for priorities to be determined on the basis of common law or equitable principles” (para. 22). By contrast, while the Insurance Act provides the mechanism by which beneficiaries can be designated and therefore become statutorily entitled to receive policy proceeds, no part of the Insurance Act operates with the necessary “irresistible clearness” to preclude the existence of contractual or equitable rights in those insurance proceeds once they have been paid to the named beneficiary.
[71] The reasoning put forward by McKinlay J. (as she then was) of the Ontario High Court of Justice in Shannon v. Shannon (1985), 50 O.R. (2d) 456, is particularly instructive in this regard. Like Michelle, the plaintiff in Shannon was the former spouse of an insured person who had contractually agreed to maintain the plaintiff as the sole beneficiary of the life insurance policy in his name and “not to revoke such beneficiary designation at any time in the future” (p. 458). Shortly thereafter, and in breach of his contractual obligation, the insured person surreptitiously changed the beneficiary designation in favour of his niece and nephew. He passed away several years later, and when the plaintiff discovered the change in beneficiary designation, she commenced an action asserting her entitlement to the proceeds of her former spouse’s insurance policy. McKinlay J. found in her favour and made the following observations (at p. 461):
It would appear from s. 167(2) [i.e. the predecessor of s. 190(2) of the Insurance Act] that the insured may at any time before the filing of an irrevocable declaration alter or revoke an existing designation by way of a declaration.
The position of the defendant is that this is precisely what the insured did, and that any finding of the court of a trust in favour of the plaintiff would have the effect of the court’s attempting to overrule a clear statutory provision.
But the Insurance Act provides a statutory framework for the protection of the insured, the insurer and beneficiaries; equity imposes duties of conscience on parties based on their relationship and dealings one with another outside the purview of the statute. When he concluded the separation agreement with his wife, the deceased bound himself to maintain the policy in good standing, which he did; he also bound himself to maintain it for the benefit of his wife, which he did not. [Emphasis added.]
[72] Shannon therefore supports the proposition that while the Insurance Act may provide for the beneficiary’s entitlement to payment of the proceeds, it “does not specifically preclude the existence of rights outside its provisions” (p. 461). Similarly, in Chanowski v. Bauer, 2010 MCBA 96, 258 Man. R. (2d) 244, the Manitoba Court of Appeal recognized that courts have readily accepted that contractual rights to policy proceeds may operate to the detriment of named beneficiaries:
Generally, the courts have imposed remedial constructive trusts in factual circumstances where the deceased has breached an agreement regarding life insurance benefits. These have arisen most commonly in cases where the husband executed a separation agreement promising to retain his former wife as the beneficiary of his life insurance policy and, in contravention of that promise, before his death, the deceased changed the designation of his beneficiary to that of his present wife or another family member. [para. 39]
[73] Accepting that contractual rights to claim policy proceeds can exist outside of the Insurance Act, can an irrevocable designation under the Insurance Act nonetheless constitute a juristic reason for Michelle’s deprivation? In my view, it cannot. This is because the applicable statutory provisions do not require, either expressly or implicitly, that a beneficiary keep the proceeds as against a plaintiff, in an unjust enrichment claim, who stands deprived of his or her prior contractual entitlement to claim such proceeds upon the insured’s death. By not ousting prior contractual or equitable rights that third parties may have in such proceeds, the Insurance Act allows an irrevocable beneficiary to take insurance money that may be subject to prior rights and therefore does not give such a beneficiary any absolute entitlement to that money (Shannon, at p. 461). Put simply, the statute required that the Insurance Company pay Risa, but it did not give Risa a right to keep the proceeds as against Michelle, whose contract with Lawrence specifically provided that she would pay all of the premiums exclusively for her own benefit. Neither by direct reference nor by necessary implication does the statute either (a) foreclose a third party who stands deprived of his or her contractual entitlement to claim insurance proceeds by successfully asserting an unjust enrichment claim against the designated beneficiary — whether revocable or irrevocable — or (b) preclude the imposition of a constructive trust in circumstances such as these (see Central Guaranty Trust Co. v. Dixdale Mortgage Investment Corp. (1994), 24 O.R. (3d) 506 (C.A.); see also KBA Canada).
[74] On this basis, the applicable Insurance Act provisions are distinguishable from other legislative enactments that have been found to preclude recovery, such as valid statutory provisions requiring the payment of taxes to the government (see GST Reference, at pp. 476-77; Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d) 65 (C.A.), at p. 69, aff’d [1991] 3 S.C.R. 593). In that context, the plaintiff’s unjust enrichment claim must fail because the legislation permits the defendant to be enriched even when the plaintiff suffers a corresponding deprivation. The same cannot be said about the statutory framework at issue in this case, however; there is nothing in the Insurance Act that justifies the fact that Michelle, who is contractually entitled to claim the policy proceeds, is nevertheless deprived of this entitlement for Risa’s benefit.
